Correlation Between United States and Gold Road

Can any of the company-specific risk be diversified away by investing in both United States and Gold Road at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining United States and Gold Road into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between United States Steel and Gold Road Resources, you can compare the effects of market volatilities on United States and Gold Road and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in United States with a short position of Gold Road. Check out your portfolio center. Please also check ongoing floating volatility patterns of United States and Gold Road.

Diversification Opportunities for United States and Gold Road

0.21

Correlation Coefficient

United States  Gold Road

Modest diversification

The 3 months correlation between United and Gold is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding United States Steel and Gold Road Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gold Road Resources and United States is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on United States Steel are associated (or correlated) with Gold Road. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gold Road Resources has no effect on the direction of United States i.e., United States and Gold Road go up and down completely randomly.

Pair Corralation between United States and Gold Road

Assuming the 90 days trading horizon United States Steel is expected to under-perform the Gold Road. In addition to that, United States is 1.13 times more volatile than Gold Road Resources. It trades about -0.04 of its total potential returns per unit of risk. Gold Road Resources is currently generating about 0.16 per unit of volatility. If you would invest  99.00  in Gold Road Resources on September 20, 2024 and sell it today you would earn a total of  25.00  from holding Gold Road Resources or generate 25.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

United States Steel  vs.  Gold Road Resources

United States Steel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days United States Steel has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Gold Road Resources

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Gold Road Resources are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Gold Road reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with United States and Gold Road

The main advantage of trading using opposite United States and Gold Road positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United States position performs unexpectedly, Gold Road can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Gold Road will offset losses from the drop in Gold Road's long position.

The idea behind United States Steel and Gold Road Resources pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.